Summary

The Enterprises have been dealing with surging foreclosure rates,rising REO inventories, and associated costs since the onset of theU.S. housing and financial crises in 2007 and 2008. By the end of 2011, their REO inventories had more than tripled to nearly180,000 units and their related expenses totaled $8.5 billion.

Further, given the financial distress in which many Americanhomeowners continue to find themselves, the Enterprises are likelyto face elevated REO inventories and costs for years to come.

As the Enterprises’ conservator and regulator, FHFA has a criticalresponsibility to oversee their REO management efforts. A failurein Enterprise efforts to secure and maintain foreclosed propertiescould drive up Enterprise losses and cause damage in affectedcommunities, e.g., foreclosed properties can lower the value ofsurrounding properties and increase blight and crime.In recent examinations, FHFA concluded that the Enterprisesshould significantly improve their REO management efforts. TheAgency identified deficiencies in the Enterprises’ management ofthe large contractor networks they employ for many REO tasks,including inadequate property inspections and insufficient controlsto detect fraudulent reimbursements. FHFA plans to follow up onthese findings in 2012.

Additionally, FHFA is working with Fannie Mae to implement apilot program under which investors may buy foreclosed propertiesin bulk if they agree to offer them for rent for specified periods.

The intent of the program is to determine whether such anarrangement is a viable means to reduce REO inventories and meetrental demands.

One Response to “OIG REPORT: Overview of the Risks and Challenges the Enterprises Face in Managing Their Inventories of Foreclosed Properties”

With all due respect, investors should NOT be allowed to purchase foreclosed properties in bulk in order to rent them to individuals. Investors need to assist homeowners in reclaiming their properties and then work with them to effectuate win-win loan modifications that are beneficial to both parties!